Amazon to pass on UK’s new digital service tax to sellers

The e-commerce company plans to raise storage and fulfilment fees which is likely to be passed on to consumers

Amazon has announced that it will pass on the cost of the UK’s new digital service tax to sellers in a move that risks the ire of the British government.

The e-commerce giant issued a note on Monday saying that, following discussions with the government over the measures, it was no longer prepared to absorb the costs of the tax.

As a result, the US tech giant plans to increase referral, storage, fulfilment and multichannel fulfilment fees by 2 per cent in the UK from next month.

The price hike is likely to be passed on to consumers, potentially making Amazon products less competitive at a time when its service is thriving.

The company revealed last week that its profits had surged to record highs in the second quarter of the year as governments introduced lockdowns that made it harder for consumers to buy goods from physical retailers. Revenues rose by 40 per cent year-on-year to £67.95bn ($88.9bn).

In the note to its seller community, the company said: While the legislation was being passed, and as we continued our discussions with the government to encourage them to take an approach that would not impact our selling partners, we absorbed this increase.

Now that the legislation has passed, we want to inform you that we will be increasing Referral fees, Fulfilment by Amazon (FBA) fees, monthly FBA storage fees and Multichannel Fulfilment (MCF) fees by 2 per cent in the UK to reflect this additional cost, it said.

Amazon has been vociferously opposed to measures, taken by individual governments, to force tech firms to pay more tax in their jurisdictions.

It said in a statement: Like many others, we have encouraged the government to pursue a global agreement on the taxation of the digital economy at OECD level rather than unilateral taxes, so that rules would be consistent across countries and clearer and fairer for businesses.

As we’ve previously indicated, the way that the government has designed the Digital Services Tax will directly impact the businesses that use our services, it said.

The Trump administration had warned that it would retaliate if the UK pressed ahead with the tech tax, but it has yet to do so. The tax is designed to be a temporary measure that will be dropped once the OECD reaches an agreement on a new international framework for taxation.